India’s widening current account deficit amid global uncertainty: At what point do alarm bells ring?

Subscribe to enjoy similar stories.The International Monetary Fund (IMF) has recently updated its economic data for member countries, as part of the health check it conducts on the global economy twice every year. One number buried in the latest World Economic Outlook database is worth pulling out: India’s current account deficit.

This external gap is not only the widest available measure of trade imbalances with other countries, but is also an indicator of how much a country needs to borrow from the rest of the world to keep its balance of payments on an even keel. Now to the data.

The IMF expects India to run a current account deficit of $84.46 billion this year, the second highest in the past two decades (see chart).It is very close to the $87.84 billion gap in 2012, which was a very tough year for the Indian economy. Any current account deficit needs to be funded by financial inflows from other countries through sources of capital such as net foreign direct investment (FDI), foreign investments in the Indian stock market and commercial loans.The main reason for the sharp increase in the expected current account deficit is not hard to guess.

IMF economists have assumed that international oil prices will be at $82.22 a barrel in 2026, as against $67.74 in 2025. Meanwhile, the Reserve Bank of India has also made a similar change in the assumptions underlying its analysis in its newMonetary Policy Report that was released in early April.

The Indian central bank now assumes that the price of a barrel of crude oil will be at $85, up from the $70 it had cemented into its forecasts in October 2025.Funding an external gap of close to $85 billion will be a challenge. Remember that India was unable to adequately fund relatively